Ghana’s bilateral creditors plan to discuss whether they will provide sufficient debt relief, which could pave the way for a $3 billion International Monetary Fund (IMF) bailout.
According to the finance minister of Ghana, Ken Ofori-Atta, the country has a debt of $5.5 billion to foreign governments and their state banks. He has expressed optimism that these bilateral creditors would agree to provide debt relief to an extent that would allow Ghana to access an IMF loan package that was approved last year.
We hope on April 11 the Paris Club will meet with China present to provide financing assurances to the IMF. This will be the defining input that [the IMF] will require to then go to their board.Finance Minister of Ghana – Ken Ofori-Atta – Reported by Financial Times
Bilateral creditors’ commitments to provide debt relief can be the first step in unlocking an IMF-backed restructuring program, and the French Treasury, which hosts the Paris Club of bilateral creditors, is “doing everything” to reach an agreement on the necessary commitments. Although China, which is owed $1.9 billion, is not a member of the Paris Club, it is expected to agree to the deal.
In December, Ghana stopped repaying most of its debts and reached a preliminary deal with the IMF for a rescue package, which is contingent on meeting various conditions such as raising revenue through a rise in the rate of value-added tax, tariff increases on public utilities, and restructuring domestic debts.
According to Ofori-Atta, Ghana has met all of the fund’s conditions, including restructuring its domestic debts, and is close to finalizing the deal.
The IMF and World Bank have warned that a third of developing countries, including 60% of low-income countries, have unsustainable or potentially unsustainable debts.